The Breakdown - Gitcoin's Kevin Owocki on Controversy and the Future of Open Source Funding

Episode Date: January 21, 2020

Ever since announcing their fourth round of grants, Gitcoin has been a major subject of conversation across the Twittersphere. In addition to all the excited buzz from both technical projects and media creators vying for grants matched based on E. Glen Weyl and Vitalik Buterin’s quadratic funding model, there has been controversy. Some of that controversy has been from outside the Ethereum community, pointing to Consensys and Ethereum Foundation support as an example of centralization. Some of the controversy has come from within, as debates rage about what is or isn’t an acceptable use of “public” resources.  No matter what one’s position, it’s hard to deny that Gitcoin is one of the most interesting experiments in open source funding to date. Listen as @nlw askes the projects founder Kevin Owocki about the history of the project, the controversy, and what makes this round of grants such a big jump forward.

Welcome back to The Breakdown, an everyday analysis breaking down the most important stories in Bitcoin, crypto, and beyond, with your host, NLW. The Breakdown is distributed by CoinDesk. Welcome back to The Breakdown. It is Tuesday, January 21st, and today our main content is going to be an interview with Kevin Awaki, the founder of Gitcoin. Gitcoin has been all over crypto Twitter around its grants program, which has created controversy, both within the Ethereum community and beyond, but is something that's a really interesting experiment in open source financing of not only technology, but community, communications, and marketing efforts.

So today is the last day of matched voting and matched grant making for Gitcoin. And so I wanted to have this interview to get Kevin's take on basically, everything that's been going on and to just explain the system a little bit better. But first, let's start with a few headlines that are related to stories we've covered recently here on the breakdown. Derivatives, derivatives, derivatives, derivatives. Derivatives have been one of the major themes around the financialization and institutionalization of Bitcoin. And there's just no way to see 2020 as anything other than starting off with a bang. According to Skew, which is a data analytics firm, there are $235 million worth of open positions across 5,329 contracts on the

CME's Bitcoin Futures as compared to $110 million in early December. So basically, this number of open interest, it's the sum total of all contracts that haven't expired, been exercised, or actually delivered. So the point here is just that the volume is significantly higher than it was even a month ago, which is, again, just further evidence of the importance of derivatives in the market and the growing importance of derivatives in the market. Next, we've been talking a lot about this battle between privacy and surveillance. And in some ways, the centerpiece of this conversation on a larger than crypto level is the battle between Apple and the U.S. government and in particular the Attorney General's office around backdoor encryption. Well, the latest is breaking news from Reuters

that basically discovered that Apple had dropped plans that were set to allow iPhone users to fully encrypt backups of their iClouds, right? And this happened after the FBI complained to them that it would harm investigations. So Apple is taking a pretty bellicose stance and fighting an attempt to create encryption backdoors, but at the same time, they are not implementing new features, which certain agencies of the government say would harm their law enforcement. This is obviously a bummer for those of us who have been looking to Apple as something of a standard bearer for big tech companies when it relates to privacy, but perhaps not surprising in terms of just the pressure that can be

brought to bear on private companies. Davos is going on right now. We talked about it all yesterday about whether the crypto community should care about what's happening at the World Economic Forum. and in particular, we've been talking a lot about the significant increase in attention in forums like the WEF on crypto and on digital currencies because of the rise of central bank digital currencies. Well, we saw a little bit of news today around Libra, which was the project that pretty undeniably got digital currencies to a new place in terms of the consciousness of governments around the world. The first comes from Switzerland. The former president of Switzerland had called the project of failure just a couple of weeks ago.

The Swiss government has now backpedaled from that, you could say, and wrote a memo that was seen by Bloomberg that says the country's regulators haven't ruled out the possibility of Libra achieving their approval and that they're continuing to monitor the project. This suggests to me at least that Swiss regulators don't want to see or push Libra away from their shores. Libra came out of the gate saying that they were going to be domiciled in Switzerland, which was to the chagrin of the U.S., it was one of the major points of contention in hearings. This sounds to me like trying to walk back an aggressive stance from a government official who is no longer in power. Switzerland was not, however, the only country to discuss Libra in the last few days.

Australia's Prudential Regulation Authority, or APRA, which is one of the country's top financial regulators, has said that it has the potential to regulate Libra. This was in an official submission to a Senate inquiry on FinTech. It was published yesterday. And basically, APRA said that it had proposed a new regulatory framework that would allow it to oversee wallets that are widely used as a means of payment, which is a direct quote. And they include Facebook's Calibra proposal as an example.

So again, this is all a way of saying that the governments of the world in Davos and beyond continue to watch Libra, continue to think about digital currencies, and that is just an unescapable frame set for this year. But with that, let's turn our attention to our main topic for the day. Gitcoin is a platform that is meant to help change the way that we finance and support open source contributions. It was started by Kevin O'Waki. It is backed by consensus, and it has been all over the news in the last few weeks around its Gitcoin grants program. I wanted Kevin to join the podcast to talk about Gitcoin broadly, but also the Gitcoin grants program and what they're trying to do differently in terms of quadratic funding, as well as to address controversy that has come both from outside the community and also from within the community, from within the Ethereum community that is kind of the core of Gitcoin's audience right now. So I think it's a really interesting conversation.

We talk a lot about the future of funding open source projects. So even if you're not necessarily super close with the Ethereum community, I think this will be a really interesting interview. So let's dive in. All right. I am here with Kevin O'Waki, who is one of the founders, or maybe the founder of Gitcoin, which has been dominating crypto conversation.

And I think it's been a really interesting project to me for a while, but has kind of jumped to a new level, I think in terms of activity and excitement and interest and maybe even a little bit of controversy this month really and is one of the interesting stories from the beginning of 2020. So Kevin, thank you so much for taking some time today. Yeah, excited to be here. Thanks so much for having me. Awesome. So for people who aren't familiar with Gitcoin, do you want to just give us a little bit of background or history?

Yeah, sure. Happy to. So Bitcoin's mission is to grow and sustain open source software. We think that open source creates a lot of value for the world, I think $400 billion per year in economic output. And so we want to give software developers the opportunity to capture some of the value that they're creating for the world. And we've got a couple products that allow developers to do that. The first is our virtual hackathon product, which basically allows you if you're someone who's building an API or a community that needs developers to engage with our community of 30,000. and software engineers. The other sort of thing that we've been working on, which has really gotten a lot of attention over the last few weeks,

is Gitcoin grants, which is like a sort of Patreon, where you can pay other people in the community with crypto in exchange for the work that they're doing in open source software. And so we've come up with this interesting matching formula for contributions to Gitcoin grants, where basically if you contribute up to, if you contribute one die, which is $1, to a Bitcoin grant, that it can be worth up to $100 worth of matching.

So that's kind of gotten a lot of buzz on social media over the last couple of weeks. And I think that it's been a pretty exciting experiment in seeing how the Ethereum community funds itself. That's, I think, the interesting context is that all of this is playing in the space of how to make contributions to open source software development viable. And you're looking at, I think, interestingly, multiple types of contribution because the Bitcoin grants, there's a technical side and a marketing or just a community side, right? One of the things that's fascinating to me about a lot of things going on in the cryptosphere is that it's like it's dog fooding itself in terms of all of these new governance systems, all of these new

funding mechanisms. The use case number one is can we make it work for us and for our community? So I guess just I would love to hear just a little bit more about the quadratic funding. How does the mechanism work in terms of a small amount of contribution can lead to a much larger matching grant? So I guess two questions is. One is where is the matching coming from? What's the kind of combination of institutions and individuals? And then two is what's the mechanism of allocation?

Yeah. Great questions. We start with the deep why of why we're doing this. So basically, this quadratic funding is built off of a paper that Glenn Weil and Vitalik posted called constrained capital liberal radicalism. And the idea is basically to move, move the decision of what projects get funded in the Ethereum space from a centralized decision maker that gets to make that decision to decision by your peers.

So basically, do your peers respect your project? Is there a broad democratic support for your project? And the funding decision is made off of that instead of by a central authority that gets to disperse the funds, which means you can do the funding distribution way more democratically, and it also means that you can do it in a way more scalable way. You can evaluate way more projects that way. So basically, according to Glenn, quadratic funding is the quote-unquote mathematically optimal way to fund public goods that a community broadly cares about.

And the formula of the way it works is that if you have Project A, which raised $100 from one donor, and you have Project B that raised $10 from 10 donors each, then that second project would be matched in a much more liberal way than the first project because it has a broader base of support of unique contributors that actually cares about it. And so quadratic matching basically takes in the number of contributors and the matching amount and decides which projects to match with a centralized matching pool based off of those two numbers.

And it can be really powerful because if you have a broad base of contributors, then a $1 contribution can mean up to $100 or even $200 in matching because that project has such a broad base of community support, which is what we're trying to measure in the first place. But we're doing two rounds of grants this time around. The first is technology grants. So projects like Tornado Cash and Metagame and the Trinity Ethereum client are raising thousands of dollars through Gitcoin grants.

And then the second category is the media grants. So basically eFub, and there's this Twitter personality called Antiprofceasis that are raising money on the Gitcoin grants platform for media grants. And I think that the media grants have been a little bit controversial, but they bring in attention for the technology grants in that, you know, these people with media grants that are raising money on Gitcoin grants already have a built-in audience. to drive traffic to get coin grants. So, yeah, that's the long and short of quadratic funding.

Happy to dive in on any of those points. I guess with the quadratic funding, you know, part of the motivation was a critique of just coin-based voting, right? Where it's like, how do you deal with the plutocracy problem, which not everyone thinks it's a problem, but to the extent that you're a person who thinks that plutocracy and just sort of voting on the basis of one token, one vote, or whatever, is not going to lead to optimal results.

It's an experiment in that. I guess the only other question that I had on that front is, have there been any other experiments with this, with quadratic voting yet? Or is this the first one that you know of? Yeah. So I know that a few other people have, have experiments with quadratic funding. And I'm forgetting the name of the project that presented at Radical Exchange that was that was doing quadratic funding experiments. But as far as I know, Bitcoin Grants is sort of the biggest round of quadratic funding experience. that we know of, but obviously we're encouraging experimentation. The community is interested in taking the success of get coin grants and expanding it out to other quadratic voting mechanisms. But I don't know that I'm at liberty to talk about any of the other ones, partially because I'm just not really super informed by who else is doing what.

It's a cool experiment to see live rather than just theoretical. So I want to talk for just a minute about, I guess, the controversy, because I feel like I remember seeing Neeraj from Coin Center tweet a week ago or something. It's like, wait, what is Gitcoin? Which I thought was like, if you're in the business of like media and you think that any attention is good attention, I think that's a really good thing in some ways. But it's been interesting to me to watch because, well, a couple things. One is that you're seeing it from people who are kind of outside the Ethereum community

looking in. But you're also seeing like really robust debate about what constitutes or should constitute grantworthiness inside the community. I think part of it is the decision you guys made to have this media category, right? Which I think is super interesting because if you're trying to address entire decentralized ecosystems, not just how the tech gets built, it's one of the major areas where if you see things as competition with centralized alternatives, centralized alternatives have marketing departments. And so it is interesting to see where that fits. What has been your take on some of the controversy? And I guess these questions more broadly of just what constitutes

grantworthiness. And I know that you've had to adapt a little bit and actually kind of re-update some of the terms almost. I think it was a question of where resources are coming from. So is this basically like is consensus or the Ethereum Foundation just now pay? Ethereum shills. That is like what it amounts to, which I think is interesting from a controversy standpoint because I think one could flip to the other side, even if you fully like took that line, you could say, well, why like shouldn't that be a thing that people are able to do? But I'm not taking any position about that. I think that one of the central lines of difference or disagreement between Bitcoin's community and any other community is questions of centralization

of people who are pushing the protocol, right? And consensus is obviously a lightning rod for that. Ethereum Foundation is a lightning rod for that, as they are comparatively more powerful than any comparative institution in Bitcoin. So I feel like that, like, it was an updated version of that same larger point of contention, which has to do with central authority. That's how I would describe it, but I don't know if that's how it felt from your end. Yeah. So before I answer, I guess I should provide a disclaimer that Gicoy itself is funded by consensus. Joe believed in me back in 2017 when I Cape Flew to New York and I said,

I want to build a social network for developers to help create economic opportunities for open source developers. But Joe's believed in me for the past three years. So take whatever answer I have with a grain of salt because I can in no way be a neutral, unbiased observers. With that disclaimer out of the way, I think that the mechanism of quadratics funding, it's the democratically optimal way to fund public goods that people care about.

So the question of who is a Twitter shell and who is not a Twitter shell and who is worth funding is now being removed from consensus in the Ethereum Foundation and being put to the Ethereum community. And I think that that's a powerful, powerful example of pushing power to the edges with respect to what projects are funded. Whereas, like, two years ago, Consensus Grants or the Ethereum Foundation grants team would have been making this decision, and that's way more centralized decision-making. Now, I mean, I think that you could say maybe the funds are still coming from the same place, so it doesn't matter.

I don't really buy that argument. I think it's about deciding who gets the funds. And then you get into an interesting discussion about who's even qualified to make that decision. Why does it matter who I think is a Twitter show and who's not? It really should be up to the community to self-organize, who's valid to fund and who's not. And that's sort of exactly what Gitcoin grants is. So I sort of reject out of hand that this is just another centralized funding by consensus in the Ethereum Foundation. This is really radically pushed power to the edges, in my opinion.

Yeah, I mean, it feels to me like there are a couple different experiments going on, right? One of them has to do with how do you take pools of resources wherever they come from, whatever combination of central and decentralized funding mechanisms there are, and allow them to better reflect the will of the community that's involved, the stakeholder community. So that's kind of like with the core piece of quadratic funding. So in some ways, like the point is that you're taking a centralized, pool of resources, quote unquote, from whoever is contributing them. But then you're changing the way

that they're distributed in a meaningful way. Right. So like, that's experiment one. I imagine that experiment two is also just how much can you shift the burden from centralized funding to external funding by having a stakeholder system that's better reflective, right? They're interrelated, but in some ways different pieces of this pie where from a game theoretical perspective, how much does it take from a centralized matching pool to actually incentivize radically more from a distributed network? My guess is that you're better, a lot of the bets of the folks who are really excited about this, would be that the better that you reflect the will of the community of contributors, the more that you're going to see resources come in from those contributors on the margins who are skeptical, right?

So it's like, if this does a better job of allocating those resources, then you might actually see more resources to allocate the next time. Right. Yeah, it's kind of like a self-fulfilling prophecy in that way. Just so that we understand, I should have led with this information up front, but we've seen about 5,000 contributions from 1,100 unique contributors in the Ethereum space that have raised 100K worth of funding for Ethereum-based projects, and then there's a 200K matching fund. So just so we get a sense of the sort of numbers that we're playing with,

That's what Grants Round 4 is doing. I think we had 200 contributions for Round 1, 400 for Round 200 for Round 2,000 for round 3, and then Round 4 now has 5,000 contributions. So it's got momentum. And just so you get a sense of my end game here, Nathaniel, is to grow and sustain open source software. I want to build a platform where developers can just work by and for the open Internet and not have to have a boss, can earn for just contributing to open source software.

And so that's sort of one of my end games. And the top four or five projects on Gitcoin grants could actually fund a full-time person for an entire quarter with the money they've raised. So I'm super proud that we're starting to get a point where we're changing lives by providing these funding rounds. So I think that in that sense, if you look at it on the individual vector of the people who are now able to focus more on their projects that are good for Ethereum, then I think that this is a win.

Totally. Like you said, the first part of the controversy has to do. almost with a outside, like previously bringing whatever, like, whether people share their biases or not, you're not going to say that that, that like critique source isn't biased as it relates to Ethereum. But then the second controversy, which is a little bit different, which I think is actually really integral to this sort of experimentation has to do with, again, on the media grant side, a little bit more, but like what constitutes a worthy contribution to the community in terms of what should be funded? I saw that you have a new policy around quid pro quo. So I'd love to hear just like a little

bit more about that? So basically, Gitcoin grants is a platform for raising money for anything. The matching rounds is constructed in economic terms with this mechanism called CLR,

constrained capital liberal radicalism, which is a mechanism for funding public goods. So a public good is a good that's both non-excludable and non-rivalrous and that individuals cannot be excluded from using or enjoying that good.

And there's no rivalry dynamic. A rival risk good is like a campground that's around a lake that only has 10 camping spots on it. You would have rivalry in order to use that public good because you can only have 10 people parked at that lake at a certain time. A non-excludable non-rival risk good is like air. The fact that you're consuming air doesn't stop me from consuming air. And so basically where I'm going with this is that,

that when we released Gitcoin grants round four, it just had a ton of buzz on social media. And there was people who were starting to develop quid pro quo relationships with their contributors. Quick pro quo just means that you give something and then you get something in return for that.

And the whole problem with the quid pro quo with respect to the mechanism is that if your contributor is giving one die and generating 100 die from the matching pool, but there was like a quid pro quo between the grant funder and the grant owner in that they're giving away, say, a membership to a private group or a T-shirt in exchange for that one-dye contribution, well, that quid pro quo isn't really benefiting the commons. That's a rivalrous sort of relationship that you're setting up because you're excluding that good from the rest of the

community by giving out the quid pro quo. So what we did was we set aside a guideline last week where we said, listen, you can't give people monetary or instruments of value in exchange for your Gitcoin grants contributions because it runs the public goods funding experiment with respect to how Gitcoin grants are funded. This brings up a lot of interesting questions about permissionless architectures and whether or not we can even enforce the fact that there's no quid pro quo, which are open research questions that Metallic and Glenn and all. other CLR researchers are working on. The TLDR is that Kicking Grants is for funding public goods,

and if you're giving away T-shirts or if you're giving away rewards to, like, kickbacks to people who are contributing, that you're not truly fulfilling the spirit of the mechanism. And so we're trying to set up social norms in the space where people understand why that's a bad thing. And any broad public broadcast of a quid pro quo or like bribery attack. will be sort of not part of the social norms of the experiment, and the users will revolt against that. So we're sort of trying to design that social norm in the Gitcoin grants community

in order to set expectations about what's in bounds and what's not. But it's an experiment, and you can expect that for round five, will issue very tight guidelines for what's a quid pro quo and what's not and why it matters, because I think it's existentially important to the mechanism that people aren't just using this to get kickbacks in exchange for their contributions. That's, I guess, the second bout of controversy that's come out of Gipcoin grants round four. And it's led to some interesting research problems and product design problems that we're

going to be addressing in upcoming rounds. Yeah, I mean, in some ways, like I read it, like if I put on my technology hat, it's a classic issue of when you release something, people are going to use it for the thing that makes sense of them, not necessarily for what you intended it for. You're talking about a need for a public funding infrastructure that's better at distributing public resources for the public goods. That doesn't mean that there's not also a cryptocentric Patreon that needs to be created, or people just need to use Patreon for a different type of contribution.

That's a direct one-to-one with audience. But it strikes me, and this is kind of where it felt like it landed, that it just is two different types of funding that were nudging up against each other uncomfortably in the same context. Yeah, I think so. And I believe in being transparent and accountable to the community, we did not do a good job of setting that expectation up front. But I think that in round five, we're going to do a better job of setting that expectation up front. Maybe someone will come up with a good mechanism for club goods, for funding club goods in the Ethereum space.

Because arguably, those add value too. It's just that we're going to have to set clear expectations in round in round five around exactly what's in bounds and in what category to push the community. forward. Listen, I really appreciate all the time. I think it's super interesting. Like I said, right at the beginning, I think it's awesome to see a live action experiment in different ways to distribute resources and fund public infrastructure. So I'm really excited that you're doing this. For those who want to pay attention, two things. One is where can they find more information? And two, what are timelines that they should be looking at? When does round four close? When is round five open? What should people know? You can go to getcoin.com and check out

the Gitcoin web experience. You can follow Gipcoin at Gipcoin on Twitter, and we'll be announcing updates about Gipcoin grants there. You can expect that round five will be probably sometime in April, so we're aiming to do a Gipcoin grants round every quarter during 2020. This round's in January. The next round will likely be in April. And most importantly, if you're doing something that's good for the blockchain community, then you can open up a Gitcoin grant at Gitcoin.com.co slash grants and earn money in exchange for the good work you're doing in the space. So check out that web experience and start shilling your grant for around five early. All right, guys, there you have it. Gipcoin from the source. Today, if you're

listening on Tuesday the 21st, is the last day to participate in Gitcoin's quadratic funding program. But there will be other opportunities. As Kevin said, they're looking to do a new wave of grants each quarter this year. And no matter what, I'm interested in your take. Tell me what you thought about Gitcoin, what you think about the future of open source funding in general. Feel free to hit me up at NLW. And as always, I appreciate all of the subscribes and all of the likes and all of the shares on Twitter. Thank you so much for listening. And I will be back tomorrow with another breakdown.